2015 Tech M&A Monthly - M&A Contract Overview

1

Tech M&A MonthlyM&A Contracts Overview

11 June 2015

2

Nat joined Corum in 1996 and brings a diverse background in technology M&A and law. While with the Enforcement Division of the U.S. Securities and Exchange Commission, Nat helped identify and build cases against securities fraud schemes. With the Strategic Development Division of Morgan Stanley's M&A group, Nat worked on cross-border acquisitions of U.S. and European companies by Japanese firms, and on financings by large Japanese public companies. Nat moved to Morgan Stanley's Tokyo office, where he reported directly to the President of Morgan Stanley, Japan Ltd. and focused exclusively on cross-border M&A.

After Morgan Stanley, Nat co-founded Postcard Software, a creator of advertiser-driven bilingual (English and Japanese) Internet content. At Activision, Nat led the company's on-line business development.

Nat earned an undergraduate degree in Japanese literature from Yale College and a law degree from UCLA. While in law school, Nat wrote articles for the International Forum at Yale, Tokyo Journal.

Nat BurgessPresidentCorum Group Ltd.

Welcome

3

Agenda

Welcome

10 Critical Terms in Any M&A Contract

Research Report

Top 6 M&A Contract Mistakes

Q&A

4

10 Critical Terms in any M&A Contract

Ward CarterChairmanCorum Group Ltd.

#1: Allocating risk for seller contract assignments

5


Russ RigginsSenior DirectorCorum Group Ltd.

#2: Providing accurate financial reps and warranties

6


Jeff BrownVice PresidentCorum Group Ltd.

#3: Managing balance sheet adjustments

7


Rob SchramSenior Vice PresidentCorum Group Ltd.

#4: Securing reasonable escrow and holdbacks

8


Dan BernsteinVice PresidentCorum Group Ltd.

#5: Ensuring liquidity when receiving publicly traded stock

9


Jon ScottSenior Vice PresidentCorum Group Ltd.

#6: Managing potential dissident shareholders

10


Elon GasperVice President, Director of ResearchCorum Group Ltd.

#7: Avoiding delays due to disclosure schedules

11


John SimpsonVice PresidentCorum Group Ltd.

#8: Ensuring seller control to meet earnouts

12


Mark JohnsonDirectorCorum Group International, Ltd.

#9: Reducing variables between signing and closing

13


Jim PerkinsRegional Director, Digital Media SpecialistCorum Group Ltd.

#10: Motivating the buyer to close

14


1: Allocating risk for seller contract assignments

2: Providing accurate financial reps and warranties

3:Managing balance sheet adjustments

4: Securing reasonable escrow and holdbacks

5: Ensuring liquidity when receiving publicly traded stock

6: Managing potential dissident shareholders

7: Avoiding delays due to disclosure schedules

8: Ensuring seller control to meet earnouts

9: Reducing variables between signing and closing

10: Motivating the buyer to close

15

Corum Research Report

Elon GasperVice President,Director of Research

Amber Stoner Senior Analyst

Aaron KingAnalyst

16

Public Markets

0%

5%

10%

15%

20%

25%

30%Weekly Percentage Change

NASDAQ S&P TECH

17

Start End Years

Dotcom Bubble Oct. 11, 1990 Mar. 24, 2000 9.5

Postwar Boom Jun. 13, 1949 Aug. 2, 1956 7.1

Current Mar. 9, 2009 ? 6.3

*Since the Great Depression. Source: S&P Capital IQ, The Associated Press

Macro view: 3 Longest* Bull Market Runs

18

May 2014 May 2015

# of Transactions 318 293

# of Mega Deals 2 4

Largest Deal $3.0B $4.4B

Private Equity Deals 13 15

# VC backed Exits 70 49

% Cross Border Transactions 34% 34%

% of Startup Acquisitions 9% 10%

Average Life of Target 15 15

Corum Index

Buyer Seller Price

Intel Alterea $16.7B

Verizon AOL Inc. $4.4B

Equinix TelecityGroup $3.6B

Unisplendour Corp.

H3C Technologies $2.3B

EMC Corp. Virtustream $1.2B

19

Mega Deals – 2015 YTD

$4.4B

$16.5B

$2.4B

$3.0B

$3.0B

$4.8B

$2.8B

$1.0B $1.4B $4.0B

$1.5B$5.3B $3.6B

$2.3B

$16.7B

$1.2B

HORIZONTAL INTERNET IT SERVICES INFRASTRUCTURE

$6.3B $7.3B $9.9B $52.3B

$1.9B

$2.8B

$1.3B

$2.5B

VERTICAL

$6.6B

20

$4.4B

$16.5B

$2.4B

$3.0B

$3.0B

$4.8B

$2.8B


$1.0B $1.4B $4.0B

$1.5B$5.3B $3.6B

$2.3B

$16.7B

$1.2B

Sold to

Target: TelecityGroup [United Kingdom]Acquirer: Equinix Transaction Value: $3.6B


$6.3B $7.3B $9.9B $52.3B

$1.9B

$2.8B

$1.3B

$2.5B

VERTICAL

$6.6B

21


Sold to

Target: H3C Technologies [China]Acquirer: Unisplendour [China]Transaction Value: $2.3B

$4.4B

$16.5B

$2.4B

$3.0B

$3.0B

$4.8B

$2.8B

$1.0B $1.4B $4.0B

$1.5B$5.3B $3.6B

$2.3B

$16.7B

$1.2B


$6.3B $7.3B $9.9B $52.3B

$1.9B

$2.8B

$1.3B

$2.5B

VERTICAL

$6.6B

22


Sold to

Target: AlteraAcquirer: IntelTransaction Value: $16.7B

$4.4B

$16.5B

$2.4B

$3.0B

$3.0B

$4.8B

$2.8B

$1.0B $1.4B $4.0B

$1.5B$5.3B $3.6B

$2.3B

$16.7B

$1.2B


$6.3B $7.3B $9.9B $52.3B

$1.9B

$2.8B

$1.3B

$2.5B

VERTICAL

$6.6B

23

2015 Megadeals YTD value - $84.6B

Horizontal8%

Vertical8%

Internet9%

IT Services12%

Infra-struc-ture63%

Horizontal Vertical Internet IT Services Infrastructure

24

Mega Deals: 2014 vs 2015 YTD

25


Sold to

Target: Virtustream Acquirer: EMC CorporationTransaction Value: $1.2B

$4.4B

$16.5B

$2.4B

$3.0B

$3.0B

$4.8B

$2.8B

$1.0B $1.4B $4.0B

$1.5B$5.3B $3.6B

$2.3B

$16.7B

$1.2B


$6.3B $7.3B $9.9B $52.3B

$1.9B

$2.8B

$1.3B

$2.5B

VERTICAL

$6.6B

26

Infrastructure Software Market

4.1x

14.6x

Public Valuation Multiples

EV

Sales

Corum Analysis

EV

EBITDA

Since Q1 May 2015

Drop in multiples as Infrastructure consolidation wave continues…

…supported by rising demand for collaboration platforms

27

Infrastructure Software MarketDeal Spotlight

03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

EV/EBITDA

15.0179889421721

14.8971307295262

14.1970041184767

14.6075760473189

15.4972291514

69

16.4832573979297

16.1012398837456

16.2227191379561

16.9554180199899

17.0264399684505

15.7140335044823

15.84 16.0751761671248

EV/S

3.60454022770604

3.57122689921548

3.40749168580466

3.88765963084406

4.06566246500057

4.26681294432359

4.37407618964

52

4.73196175439388

4.34198228056484

4.15561892281799

4.12348278561113

4.03 4.23480441994091

7.00 x

9.00 x

11.00 x

13.00 x

15.00 x

17.00 x

2.25 x

2.75 x

3.25 x

3.75 x

4.25 x

4.75 x

EV/EBITDA EV/S

Sold to

Target: Rally Software Development CorpAcquirer: CA TechnologiesTransaction Value: $480MEV/Sales: 5.5x

-Agile development software and services

-Complements CA’s offerings in the areas of DevOps and Management Cloud

28


03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

EV/EBITDA

15.0179889421721

14.8971307295262

14.1970041184767

14.6075760473189

15.4972291514

69

16.4832573979297

16.1012398837456

16.2227191379561

16.9554180199899

17.0264399684505

15.7140335044823

15.84 16.0751761671248

EV/S

3.60454022770604

3.57122689921548

3.40749168580466

3.88765963084406

4.06566246500057

4.26681294432359

4.37407618964

52

4.73196175439388

4.34198228056484

4.15561892281799

4.12348278561113

4.03 4.23480441994091

7.00 x

9.00 x

11.00 x

13.00 x

15.00 x

17.00 x

2.25 x

2.75 x

3.25 x

3.75 x

4.25 x

4.75 x

EV/EBITDA EV/S

Sold to

Target: Esna Technologies [Canada]Acquirer: Avaya [USA]

-Real-time collaboration and communications software

-Enables Avaya to integrate multivendor communications capabilities into cloud-based applications

29


03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

EV/EBITDA

15.0179889421721

14.8971307295262

14.1970041184767

14.6075760473189

15.4972291514

69

16.4832573979297

16.1012398837456

16.2227191379561

16.9554180199899

17.0264399684505

15.7140335044823

15.84 16.0751761671248

EV/S

3.60454022770604

3.57122689921548

3.40749168580466

3.88765963084406

4.06566246500057

4.26681294432359

4.37407618964

52

4.73196175439388

4.34198228056484

4.15561892281799

4.12348278561113

4.03 4.23480441994091

7.00 x

9.00 x

11.00 x

13.00 x

15.00 x

17.00 x

2.25 x

2.75 x

3.25 x

3.75 x

4.25 x

4.75 x

EV/EBITDA EV/S

Sold to

Target: Tropo [USA]Acquirer: Cisco Systems [USA]

- Web-based collaboration API Platform-as-a-Service

- Extends Cisco’s collaboration technologies and enables it to reach out more than 200,000 developers

30

2.4x

13.3x


EV

Sales

Corum Analysis

EV

EBITDA

Since Q1 May 2015

Consumer Technology Market

Bouncing back after nine month slide…

...starting to match established upward EBITDA trend seen since last summer

31

Consumer Application Software MarketDeal Spotlight

03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

EV/EBITDA

10.8179370264244

7.98758419199633

7.41773390862344

9.69971421561307

9.44481547452925

10.3699391758

66

11.6027678535

95

12.3348910199045

11.6352021216274

12.2584553258

22

12.1902056952082

12.47 12.7595832438

84

EV/S

2.46707453610308

2.22773039257438

2.24232691687921

2.61683148760987

2.57131971996332

2.64769638126436

2.40598401071

73

2.30962318217212

2.32189279433827

2.30599012579238

2.21129750106589

2.18 2.15837977036244

5.50 x

6.50 x

7.50 x

8.50 x

9.50 x

10.50 x

11.50 x

12.50 x

13.50 x

1.10 x

1.30 x

1.50 x

1.70 x

1.90 x

2.10 x

2.30 x

2.50 x

2.70 x

EV/EBITDA EV/S

Sold to

Target: TimefulAcquirer: Google

- Mobile scheduling application

- Timeful’s iOS technology can be applied to Android to bring smart scheduling to Google Apps

32


03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

EV/EBITDA

10.8179370264244

7.98758419199633

7.41773390862344

9.69971421561307

9.44481547452925

10.3699391758

66

11.6027678535

95

12.3348910199045

11.6352021216274

12.2584553258

22

12.1902056952082

12.47 12.7595832438

84

EV/S

2.46707453610308

2.22773039257438

2.24232691687921

2.61683148760987

2.57131971996332

2.64769638126436

2.40598401071

73

2.30962318217212

2.32189279433827

2.30599012579238

2.21129750106589

2.18 2.15837977036244

5.50 x

6.50 x

7.50 x

8.50 x

9.50 x

10.50 x

11.50 x

12.50 x

13.50 x

1.10 x

1.30 x

1.50 x

1.70 x

1.90 x

2.10 x

2.30 x

2.50 x

2.70 x

EV/EBITDA EV/S

Sold to

Target: Wunderlist [Germany]Acquirer: MicrosoftTransaction Value: $100-200 million

- Mobile task planning application

- 5th mobile acquisition in past half-year, complements the purchase of Sunrise and Acompli

33


03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

EV/EBITDA

10.8179370264244

7.98758419199633

7.41773390862344

9.69971421561307

9.44481547452925

10.3699391758

66

11.6027678535

95

12.3348910199045

11.6352021216274

12.2584553258

22

12.1902056952082

12.47 12.7595832438

84

EV/S

2.46707453610308

2.22773039257438

2.24232691687921

2.61683148760987

2.57131971996332

2.64769638126436

2.40598401071

73

2.30962318217212

2.32189279433827

2.30599012579238

2.21129750106589

2.18 2.15837977036244

5.50 x

6.50 x

7.50 x

8.50 x

9.50 x

10.50 x

11.50 x

12.50 x

13.50 x

1.10 x

1.30 x

1.50 x

1.70 x

1.90 x

2.10 x

2.30 x

2.50 x

2.70 x

EV/EBITDA EV/S

Sold to

Target: Tempo.aiAcquirer: Salesforce

- Mobile artificial intelligence and calendar integration app will be shut down

- Salesforce bought mobile authentication startup Toopher earlier this year

34

Horizontal Application Software Market

3.6x

19.5x


EV

Sales

Since Q1 Corum Analysis

EV

EBITDA

May 2015

Remains at spring levels with ongoing themes of HCM & Data Analytics

Still near 12-month highs as market appreciates profits

35

Horizontal Application Software MarketDeal Spotlight

03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

EV/EBITDA

18.35047914760

45

17.92935996754

39

18.49490938417

08

18.38276796503

82

17.31833742572

69

17.52228884944

09

17.21123239528

36

19.04184890901

61

18.44143176502

92

18.77694701162

15

17.50939305478

69

17.57880250992

33

19.79

EV/S

3.708999865686

48

3.565726226923

48

3.572630318977

59

3.959767938840

7

3.570310618100

94

3.655532169981

73

3.333481721135

6

3.332120756236

98

3.305531824648

72

3.431047224334

33

3.566398948384

79

3.566398948384

79

3.672802976565

31

7.00 x

9.00 x

11.00 x

13.00 x

15.00 x

17.00 x

19.00 x

21.00 x

1.75 x

2.25 x

2.75 x

3.25 x

3.75 x

4.25 x

EV/EBITDA EV/S

Sold to

Target: BorderfreeAcquirer: Pitney BowesTransaction Value: $448M

- Cross-border e-commerce shipping SaaS

- Provides retailers to transact with consumers globally

Artem Mamaiev

Probably needs change to $395M.

36


03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

EV/EBITDA

18.35047914760

45

17.92935996754

39

18.49490938417

08

18.38276796503

82

17.31833742572

69

17.52228884944

09

17.21123239528

36

19.04184890901

61

18.44143176502

92

18.77694701162

15

17.50939305478

69

17.57880250992

33

19.79

EV/S

3.708999865686

48

3.565726226923

48

3.572630318977

59

3.959767938840

7

3.570310618100

94

3.655532169981

73

3.333481721135

6

3.332120756236

98

3.305531824648

72

3.431047224334

33

3.566398948384

79

3.566398948384

79

3.672802976565

31

7.00 x

9.00 x

11.00 x

13.00 x

15.00 x

17.00 x

19.00 x

21.00 x

1.75 x

2.25 x

2.75 x

3.25 x

3.75 x

4.25 x

EV/EBITDA EV/S

Sold to

Target: NexternalAcquirer: HighJump

- Omni-channel e-commerce & marketing SaaS

- Builds up its supply chain solutions

37

03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

EV/EBITDA

18.35047914760

45

17.92935996754

39

18.49490938417

08

18.38276796503

82

17.31833742572

69

17.52228884944

09

17.21123239528

36

19.04184890901

61

18.44143176502

92

18.77694701162

15

17.50939305478

69

17.57880250992

33

19.79

EV/S

3.708999865686

48

3.565726226923

48

3.572630318977

59

3.959767938840

7

3.570310618100

94

3.655532169981

73

3.333481721135

6

3.332120756236

98

3.305531824648

72

3.431047224334

33

3.566398948384

79

3.566398948384

79

3.672802976565

31

7.00 x

9.00 x

11.00 x

13.00 x

15.00 x

17.00 x

19.00 x

21.00 x

1.75 x

2.25 x

2.75 x

3.25 x

3.75 x

4.25 x

EV/EBITDA EV/S

Horizontal Application Software MarketDeal Spotlights

Sold to

Target: AcclarisAcquirer: Towers WatsonTransaction Value: $140M

- Employee health benefits administration SaaS

- Follow the acquisition of Saville for $64M in April

Sold to

Target: ACE Payroll [New Zealand]Acquirer: MYOB [Australia] Transaction Value: $10.2M

- Benefit & payroll management software

38


Sold to

Target: InformaticaAcquirer: PermiraTransaction Value: $5.3B

$4.4B

$16.5B

$2.4B

$3.0B

$3.0B

$4.8B

$2.8B

$1.0B $1.4B $4.0B

$1.5B$5.3B $3.6B

$2.3B

$16.7B

$1.2B


$6.3B $7.3B $9.9B $52.3B

$1.9B

$2.8B

$1.3B

$2.5B

VERTICAL

$6.6B

39


03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

03/31/2014

04/30/2014

05/31/2014

06/30/2014

07/31/2014

08/31/2014

09/30/2014

10/31/2014

11/30/2014

12/14/2014

01/31/2015

02/01/2015

03/01/2015

EV/EBITDA

18.35047914760

45

17.92935996754

39

18.49490938417

08

18.38276796503

82

17.31833742572

69

17.52228884944

09

17.21123239528

36

19.04184890901

61

18.44143176502

92

18.77694701162

15

17.50939305478

69

17.57880250992

33

19.79

EV/S

3.708999865686

48

3.565726226923

48

3.572630318977

59

3.959767938840

7

3.570310618100

94

3.655532169981

73

3.333481721135

6

3.332120756236

98

3.305531824648

72

3.431047224334

33

3.566398948384

79

3.566398948384

79

3.672802976565

31

7.00 x

9.00 x

11.00 x

13.00 x

15.00 x

17.00 x

19.00 x

21.00 x

1.75 x

2.25 x

2.75 x

3.25 x

3.75 x

4.25 x

EV/EBITDA EV/S

Sold to

Target: ColdLightAcquirer: PTCTransaction Value: $100M + $5M potential earnout

- Big data machine learning and predictive analytics provider

- Reinforces its position in the IoT market

40

Corum Research Report

Elon GasperVice President,Director of Research

Amber Stoner Senior Analyst

Aaron KingAnalyst

41


42


1. Hiring an inexperienced lawyer

43



2. Drafting heavily in your own favor

44




3. Avoiding confrontation on key issues

45





4. Letting issues die with the lawyers

46






5. Not leveraging diligence for preparation of disclosure schedules

47






5. Not leveraging diligence for preparation of disclosure schedules

6. Leaving contingencies to closing

48

Q&A

We welcome your questions! Use Q&A window on left side Submit to queue at any time Ask “all panelists” – see “ask” option above text-entry box

49

Toronto

Growth & Exit Strategies for Software & IT Companies

Thursday, June 18, 2015

Trump Hotel, Toronto, Ontario

50

Upcoming Conference ScheduleSelling Up Selling Out (SUSO) - Ready to go to market? During this half-day workshop, learn to prepare, position, research, value, negotiate, and execute due diligence for maximum price and structure. This is the most attended Tech M&A event ever – participants have done over $1 trillion in transaction value.

Merge Briefing (MB) - The Merge Briefing is a 90-minute executive briefing providing a current M&A market update (trends, valuations, etc.), as well as a brief overview of the Tech M&A process: “8 Steps To An Optimal Outcome.”

www.CorumGroup.com/Events

Jun. 11: Manchester – MB

Jun. 16: Boston – SUSO

Jun. 25: San Diego – MB

Jun. 25: Istanbul – MB

Jun. 30: Cincinnati – SUSO

Jul. 7: Silicon Valley – MB

Jul. 7: San Francisco – MB

Jul. 9: Orange County – MB

Jul. 9: Los Angeles – MB

Jul. 17: Berlin – MB

51

After the Deal – Celebration

52

www.corumgroup.com

Business

2015 Tech M&A Monthly - M&A Contract Overview